A clawback requires the GP to return carry it has received if, over the fund's life, it has been paid more than its entitlement.

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Fund economics

Carried interest

Fund economics

What is Carried Interest? How Carry Works in PE & VC Funds

Q: What is the difference between carried interest and a management fee?

A management fee is charged on commitments or invested capital regardless of performance. Carried interest is paid only out of profits, after LPs have been repaid.

Q: What is a typical carried interest percentage?

20% is the most common headline rate, though it varies by strategy and fund. Some funds step up to 25–30% above a higher return threshold.

By aama.io Fund Operations Team · Last reviewed 2 October 2026

Carried interest, or carry, is the share of a fund's profits paid to the general partner as performance compensation, typically 20%. It is earned only after limited partners have received their capital back and, in most funds, a preferred return, and it is paid through the fund's distribution waterfall.

Sourced information — it can change

This page is compiled from public sources (listed at the bottom) and last reviewed on 2 October 2026. Regulations, thresholds, fees and market practice change, so it may not reflect the latest position. Check with your fund documents (LPA), IRAS (for tax treatment) and a licensed tax adviser before acting.

Key facts

Also called	Carry, performance fee, promote
Typical rate	20% of profits (negotiated per fund)
Paid to	The GP, or its carry vehicle, from fund distributions
Conditions	Usually a hurdle (preferred return), often with a GP catch-up
Timing	Whole-fund (European) or deal-by-deal (American) waterfall
Risk to the GP	Clawback if carry is overpaid over the fund's life

How it works

Profit is measured. Profit is what the fund distributes above the capital LPs contributed, including capital used for fees and expenses.
The hurdle is tested. If the fund has a preferred return, LPs must receive it before the GP earns any carry. Below the hurdle, carry is zero.
The catch-up applies. Above the hurdle, the GP receives all or part of distributions until it holds its carry percentage of total profit to date.
The split applies. Remaining profit is split between LPs and the GP at the carry ratio, usually 80/20.
Clawback true-up. At the end of the fund, if the GP was paid more than its entitlement, it returns the excess to LPs under the clawback.

Worked example: $100M fund, 8% hurdle, 20% carry, full catch-up

LPs contributed $100M. For simplicity, the 8% compounding hurdle works out to $36M of profit over four years. Compare three outcomes (whole-fund waterfall).

Outcome A: $130M returned → profit $30M, below the $36M hurdle	Carry $0
Outcome B: $140M returned → profit $40M, $4M into the catch-up	Carry $4M
Outcome C: $200M returned → profit $100M, catch-up complete	Carry $20M

The hurdle creates a cliff: A earns nothing despite a 30% gain. By C, a full catch-up has put the GP at exactly 20% of total profit, as if there had been no hurdle.

Common mistakes

Calculating carry as 20% of all gains without applying the hurdle and catch-up.
Ignoring fees and expenses when measuring profit. LPs must recover them before carry is earned.
Forgetting that early carry in a deal-by-deal waterfall may have to be clawed back later.
Assuming carry is taxed the same everywhere. Treatment varies by jurisdiction and facts.

The Singapore and APAC angle

Carry terms are set in the fund documents, not by Singapore law. The Singapore-specific question is tax: how carry is taxed depends on the jurisdictions of the GP and its investment team and the facts, and on whether the fund holds a Section 13O or 13U incentive. Model it with the tools below and take advice before relying on a figure.

Frequently asked questions

What is the difference between carried interest and a management fee?

What is a typical carried interest percentage?

What is a clawback?

Free tools

Management Fee & Carried Interest Modeler Carried Interest Tax Estimator (Singapore, US, UK)Distribution Waterfall Calculator (LP/GP, Carry, Catch-up)

See how aama.io fits

VC / PE Firms

Capital calls, distributions, carry and LP communications in one place.

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Go deeper

American vs European Waterfalls: How Carry Timing Changes What LPs Keep

Related terms

Distribution Waterfall

A distribution waterfall is the order of priority in which a fund's proceeds are paid out. Typically LPs first receive their invested capital back, then a preferred return, then the GP receives a catch-up, and finally profits are split between LPs and the GP, usually 80/20, as carried interest.

Management Fee

A management fee is the annual fee a fund pays its manager to cover operating costs, regardless of performance. In private equity and venture capital it is commonly around 2% a year, charged on committed capital during the investment period and on invested capital afterwards, and it is funded through capital calls.

TVPI, DPI and RVPI

DPI, RVPI and TVPI are fund performance multiples measured against paid-in capital. DPI is distributions divided by paid-in capital, the cash actually returned. RVPI is remaining net asset value divided by paid-in capital, the value still held. TVPI is DPI plus RVPI, the total value created so far.

Sources

ILPA Principles 3.0

General information, not tax, legal, accounting or investment advice. This content is sourced from the references above and from public regulatory material, and it can become outdated. Always confirm the current position with your fund documents (LPA), IRAS (for tax treatment) and a licensed tax adviser, and take professional advice for your specific situation, before relying on it.